SalemNews.com, Salem, MA

September 3, 2013

Column: $67 million change raises questions about National Grid study

Michael J. Harrington
The Salem News

---- — Notwithstanding Rep. John Keenan’s Op-Ed piece in The Salem News of Aug. 1 titled, “Keenan: Important To Know The True Cost Of The Cable Project,” which appeared two days after the release of National Grid’s most recent cost estimate for an underwater route for the cable renewal project, those of us who have raised initial concerns remain skeptical that we have yet to receive a realistic estimate of the cost differential between the Grid’s preferred land route as against the underwater alternative.

The reason for the ongoing concern should be obvious. National Grid on April 9, 2012, provided a handout to those attending one of its periodic public meetings on this issue. The utility cited the disparity between the ocean alternative and the land route as being approximately $43 million for the ocean route as against $28 million for the land route. Rep. Keenan was in attendance at that meeting and presumably received this material, as did everyone else present.

It should be noted that the firm that prepared both the most recent study suggesting a $110 million cost is the same firm that prepared the information provided by National Grid in their April 2012 handout — Burns & McDonnell of Kansas City, Mo. There is obviously a need before the debate intensifies to recognize that everyone’s interest would be well-served by attempting to arrive at an objective measure of what the cost differential really is. In addition to obvious neighborhood impacts (despite National Grid’s decision to avoid Derby Street), there will be a significant impact either directly or peripherally on both homeowner and business interests in downtown Salem — with those of us who are cynical (myself included), skeptical that the timeline optimistically suggested in terms of two construction seasons to accomplish this will be adhered to.

Efforts during the intervening period to obtain the full text of the April 2012 study have proven fruitless. At the April 2012 meeting, National Grid refused to provide the full study, citing among other reasons national security constraints. Efforts via local and state officials (the mayor, state representative and state senator) to obtain the full report have to date proven unavailing. It should also be noted that the engineering firm in question has a practice heavily based on work for a range of utilities — Iberdrola (Central Maine Power) and Northeast Utilities, among others.

The analogy this suggests is the performance of the Wall Street rating agencies during the 2007-2008 period leading ultimately to the cataclysmic near-collapse of the country’s financial service sector at that time. Egregiously inflated ratings on a variety of financial projects triggered massive defaults on a global scale. The practice on the part of the rating agencies was driven by the substantial fees involved, being paid by the very banks using their services in creating the near-global chaos that ensued.

The intent here, then, is as much as possible to ensure totally objective clarification of the concerns raised by the utility as to cost and related maintenance and access issues, so that the public — particularly those in the immediately affected areas — will have some means, achieved at arm’s length, of being able to come to their own conclusion as to the relative merit of the National Grid approach.

Two other areas in terms of both the Grid announcement and the Keenan Op-Ed piece are worth addressing. First, at the time that the nonbinding initiative was filed with the City Council, those of us concerned had only the April 2012 $43 million cost estimate for the ocean route versus $28 million for the land route. We were further constrained by state law and local regulations to utilize the one remaining summer Salem City Council meeting and accordingly submitted the nonbinding petition to the City Council on July 18 with every effort to apprise the council of what we knew in terms of the economics of the project, as outlined in both the local press and in other communications to local and state officials. The inference that there was a deliberate effort to avoid addressing the economics is misplaced. The current National Grid estimate was released to the public on or about July 30 — 12 days after the council meeting.

Second, as to the rate impact on the area as it affects prospective utility charges — to the best of our knowledge, any project approved by the Energy Facilities Siting Board and implemented by the utility will be included in its entire rate base, which encompasses a significant portion of the commonwealth, with millions of customers sharing any increased costs. To imply that Salem or the immediately surrounding area would face distortive cost increases is simply not true.

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Michael J. Harrington is a Beverly resident whose family owns the Hawthorne Hotel.